Sunday, August 30, 2015

Weekend Market Report: Looking Ahead

Statistically speaking markets tend not to crash in the month of August which is why I feel what happened last week was merely a 'dress rehearsal,' but since almost all independent market observers agree that a deeper and wider correction is needed in the market I've been trying to imagine what a pullback might look like in the coming months.

The narrative I have chosen is as follows: if Central Banks and major investing institutions have learned anything from 2008 it's that market corrections are not necessarily a bad thing if the gas in the balloon is let out slowly over time. Time is a critical factor here - it enables people, investors, corporations and central banks to adapt. With interest rate increases on the horizon I would like to think that any decline in the market forthwith is allowed to happen in a orderly fashion between around October and April, much like it did in 2000/2001.

Between now then however, a lower high first needs to be put in and for that to happen a buy signal needs to be produced. Since the end of the labor day euphoria in the U.S. I expect a decline to occur next week (a higher low on the RSI) whereupon the remainder of the month will be spent putting in a lower high. In this fashion institutions will be able to unwind long positions and enter shorts over the month of September since the market's appetite for a market decline has now been gauged.   


What happens in the coming months might look like this:


The monthly pivot of 2116 would be an ideal place for this long term retracement to happen but a strong buy signal on the RSI needs to happen first in order for us to get there. Overall September should be a strong month, especially so since the U.S. Federal Reserve needs to announce interest rate increases during a period of robust market growth.

Jakob Richardson © 2015

Sunday, August 23, 2015

Natural Gas Divergence Appearing?

The correction of the last week has really caught me off guard. Don't in any way think that this is an endorsement of the general "good" health of the global economy because it's not, but serious market corrections statistically don't occur in August. Some of my recent calls have been catastrophic (Energy and Emerging Markets come to mind) but I tend to view what has happened in the past week as a dress-rehearsal for interest rates increase in September and further Yuan devaluation, meaning a market bounce near-term may occur as brokers and businesses come back from summer vacation.

I and other commentators like theartofchart.net have called for an intermediate market low followed by a recovery. Additionally, crude oil may pause in it's decline (rumors are already swirling about an emergency OPEC summit) and ascend to $48 before continuing downwards to $30. It was while I was reading and studying crude oil that I noticed some interesting developments in natural gas. 


Divergence has begun to appear on the RSI(14) indicator for GASL in what looks the end of a five wave decline. Stochastics are also appearing as oversold. Additionally the natural gas ETF UNG on the weekly chart looks like it's about to start a three wave ascent. Momentum has been building positively on the MACD for six months now.


I have been ignoring natural gas for a long time as it's lateral movement for the last six months has gone nowhere, but now I think it's time for it to go back on people's radar for the near to medium term, especially if crude oil makes a brief ascent to $48.

Sunday, August 16, 2015

Market Index Report: Possibly The Last Ascent Before Autumn

I am still optimistic about the coming weeks and divergences are appearing prominently in Energy, Emerging Markets and Gold Miners. Please appreciate that a correction is still on the horizon, but not until around mid-September to October. Just to reiterate what I many other writer's have noticed in the markets lately:
  1. We've seen very low volumes which means the decline has been driven by small investors and not institutional ones.
  2. VIX continues to decline.
  3. The NASDAQ and S&P are still showing signs of strength.
  4. The DOW looks set to enter wave 2 which is 'up' of a larger wave 'down. 
Divergence abounds on the RSI indicators for many major index ETF's. I believe this is the beginning of a three wave counter trend that should take us through to October whereupon the decline we have seen up until this point shall resume, most probably until March.


SPX: $SPX
  • SPX is looking like a weak long/buy
  • The RSI(5) has broken up and the RSI(14) is still positive.
  • We are precariously positioned in a rapidly shrinking triangle but after Friday's strong showing for now I feel like it will continue to break up.

 U.S. Dollar: $USD
  • U.S. dollar is listed as a neutral
  • My call for a fall in the U.S. dollar was correct and we have now come up to support in my current ascending channel. A break above the dotted resistance line connecting previous highs in March and April has not been breached. 
  • I don't really know where it goes from here so I'm guessing a bounce but then short when 97.5 is reached.

Crude Oil Index: $WTIC
  • Crude is listed as a speculative long/buy.
  • You will notice the divergence that has begun to emerge on the RSI(5). This is not a long term trend change but rather a counter-trend ascent that should be taken advantage of.
Biotechnology: IBB
  • IBB is listed as a neutral.
  • Support on the RSI(14) was breached but divergence has clearly emerged on the RSI(5). 

Brazil: BZQ
  • BZQ is listed as a speculative long/buy.
  • Divergence has strengthened.

China: FXI
  • FXI is listed as a speculative long/buy.
  • Since my last recommendation this hasn't really gone anywhere so let's see how this plays out for one more week.
  • The RSI(5) and RSI(14) have a decent 'buy' signal shown. 
  • Upper limit set around $44.

Emerging Markets: EEM
  • EEM is listed as a speculative long/buy.
  • Like China, EEM is also showing the familiar completed five-wave-down-pattern. I am also expecting a three-wave-counter trend to unfold before the decline resumes. 
  • This picture coincides nicely with my previous expectation of a weak U.S. dollar in the coming week.

Energy: XLE
  • XLE is listed as a long/buy.
  • The second low has gone in and a strong setup has appeared on the RSI(5) and RSI(14).
  • Near term weakness I believe has concluded. The ascent we predicted has materialized and a brief retracement will now take place followed by it's continued ascent.

Europe: VGK
  • VGK is now listed as a speculative long/buy.
  • Was it Greece? Dunno but VGK is looking good!

Gold Miners: GDX
  • GDX is listed as a speculative long/buy.
  • The early part of next week will likely be focused on continuing to work off some over-bought conditions but support should be found along the support lines shown on the RSI and chart.
India: PIN
  • PIN is now listed as a neutral

Latin America: ILF
  • Latin America hasn't been commented on much in the past but is looking like a great long/buy (for the time being at least).
  • Emerging markets are generally showing the beginning of a counter-trend three wave ascent.

Real Estate: IYR
  • IYR is listed as a strong buy.
  • I was previously neutral on real-estate after it had been overbought but the EMA's are positioned like it's going to explode next week.

Russia: RSX
  • RSX is a speculative long/buy
  • I think we've seen the first part of a turn-around for Russia with the low put in on August 27th which was just outside the Keltner channel. The near term weakness in Russia I believe has come to an end.

Semiconductors: SMH
  • Listed as a long/buy.
  • Excellent 'buy' signals made on the RSI(5) and RSI(14) and near term weakness I believe has ended.
  • We are still in wave one of the three-wave-counter-trend up.

High Yield Short: SJB
  • SJB has also been omitted but I though would benefit from being highlighted this week.
  • Short term SJB is looking like a short/sell
  • I really like the long-term prospect for shorting junk bonds.


U.S. Treasuries: TLT
  • TLT is listed as a short/sell.
  • Coincident with U.S. dollar weakness would be a fall in treasuries. On the 30 minute chart a huge sell signal has appeared.
  • We're coming up to a gap that may or may not be filled along with some upward resistance appearing on the RSI(5). 


Jakob Richardson © 2015

Sunday, August 09, 2015

Market Index Report: $SPX, $USD, IBB, IYR, SMH, TLT, EWZ, BZQ, XLE, XLF, XLP, FXI, RSX, XTN

We have just finished a 'down' week and yet I am somehow optimistic about the coming weeks. Rest assured, a correction is on the horizon, but not until around mid-September to October. Several writers in the blogosphere have made some interesting observations about the recent decline which I will paraphrase:
  1. We've seen very low volumes which means the decline has been driven by small investors and not institutional ones.
  2. VIX continues to decline.
  3. The NASDAQ and S&P are still showing signs of strength.
  4. The DOW looks set to enter wave 2 which is 'up' of a larger wave 'down.'
Previously I declared my "hot picks" to be semiconductors, gold juniors, China, and energy and those recommendations remain but the buy signals have taken a little longer than anticipated to materialize. All of this is predicated on a fall in the U.S. dollar which is of course bullish for China and emerging markets. 

SPX: $SPX
  • SPX is looking like a weak long/buy
  • Please be aware that we are precariously positioned at the moment. Yes we are in an ascending channel and the EMA(14) is over the (EMA 34) but there is currently a divergence between the RSI(5) and (RSI 14). The RSI(14) suggests the longer term trend is up but the recent lower-high on the RSI(5) suggests that Monday and Tuesday will be crucial.
  • The RSI(14) is signalling a 'buy.' 

 U.S. Dollar: $USD
  • U.S. dollar is listed as a short/sell
  • Any downturn in the U.S. dollar is good for everyone else. The RSI(5) just put in a lower high signalling a possible decline and RSI(14) has the U.S. currently sitting at support.

Biotechnology: IBB
  • IBB is listed as a neutral.
  • I was correct about IBB's ascent since I last posted however in that time a crucial support on the RSI(14) has been breached.
  • We are approaching a long term support line so next week is crucial if we expect a bounce.

Brazil: BZQ
  •  BZQ is listed as a speculative lone/buy.

China: FXI
  • FXI is listed as a speculative long/buy.
  • Since my last recommendation this hasn't really gone anywhere so let's see how this plays out next week.
  • Don't for one second think that this recommendation is an endorsement for the general health and security of the Chinese market, it's not! All that I think has happened is we have seen the "five wave down" (noted with two lows, one outside the Keltner channel) followed by a three wave counter-trend up. After this counter trend rally the decline will continue. 
  • The RSI(5) and RSI(14) have a decent 'buy' signal shown. 
  • Upper limit set to around $44.

Consumer Staples: XLP
  • XLP is listed as a short/sell.

Emerging Markets: EEM
  • EEM is listed as a speculative long/buy.
  • Again, my call on China and emerging markets was a week early. A crucial support has been found on the RSI(14) which I think will hold.
  • Like China, EEM is also showing the familiar completed five-wave-down-pattern. I am also expecting a three-wave-counter trend to unfold before the decline resumes. 
  • This picture coincides nicely with my previous expectation of a weak U.S. dollar in the coming week.

Energy: XLE
  • XLE is listed as a long/buy.
  • The second low has gone in and a strong setup has appeared on the RSI(5) and RSI(14).
  • Near term weakness I believe has concluded.

Europe: VGK
  • VGK is now listed as a speculative long/buy.

India: PIN
  • PIN is listed as a long/buy
  • I'm really hoping that gap is filled so we'll have to see this week.

Real Estate: IYR
  • IYR is listed as a neutral.
  • IYR has emerged from our bullish declining wedge but now finds itself stuck by a resistance line set by a previous high back in June. 
  • IYR has also undertaken a five-wave-down-pattern and now finds itself paused in the second part of its' three-wave ascent. 
  • I'm expecting some oscillation between $73.50 and $75.0 for the near-term.

Russia: RSX
  • RSX is a speculative long/buy
  • I think we've seen the first part of a turn-around for Russia with the low put in on August 27th which was just outside the Keltner channel. The near term weakness in Russia I believe has come to an end.

Semiconductors: SMH
  • Listed as a long/buy.
  • Excellent 'buy' signals made on the RSI(5) and RSI(14) and near term weakness I believe has ended.
  • We are still in wave one of the three-wave-counter-trend up.

Transportation: XTN
  • XTN is listed as a speculaitve short/sell.
  • Downside is expected in XTN next week with the second part of the three wave ascent taking place.   
  • I believe a higher low will be put in on the RSI(5) and RSI(14).

U.S. Treasuries: TLT
  • TLT is listed as a short/sell.
  • Coincident with U.S. dollar weakness would be a fall in treasuries. On the 30 minute chart a huge sell signal has appeared.
  • We're coming up to a gap that may or may not be filled along with some upward resistance appearing on the RSI(5). 


Jakob Richardson © 2015

Saturday, August 08, 2015

Commodities Report: Daily Charts

Agriculture: DBA
  • DBA is listed as speculative long/buy.

Aluminum: JJU
  • JJU is a speculative long/buy.

Coal: KOL
  • KOL is listed as a speculative long/buy.

Coffee: JO
  • JO is listed as a speculative long/buy.

Commodities: DBC
  • DBC is being changed to a speculative long/buy.

Copper: JJC
  • JJC is listed as a neutral for this week.

 Corn: CORN
  • CORN is listed as a speculative long/buy.

Cotton: BAL
  • BAL is listed as a neutral.

Crude Oil: USO
  • USO is listed as a neutral.

Gold: GLD
  • GLD is a long/buy.

Lithium: LIT
  • LIT is listed as a strong long/buy.

Livestock: COW
  • COW is listed as a long/buy.

Natural Gas: UNG
  • UNG is listed as a neutral.


Palladium: PALL
  • PALL is listed as a long/buy.

Platinum: PPLT
  • PPLT is listed as a long/buy.

Silver: SLV
  • SLV is listed as a speculative long/buy.

Soy: SOYB
  • SOYB is listed as a neutral.

Steel: SLX
  • SLX is listed as a speculative long/buy.

Timber: CUT
  • CUT is listed a speculative long/buy.

Uranium: URA
  • URA is a long/buy.


Jakob Richardson © 2015